Article
Telecom Industry's New Norm: Embracing Customer Centricity
Germany's telecom industry is characterized by a rapidly changing consumer behavior, with customers placing increasing value on flexibility and personalized services. Customers readily switch providers, driven by a lack of differentiation among them. This article delves into the reasons behind this behavior and offers data-driven strategies for telcos to better understand customer needs and integrate customer-centric approaches into their business and company DNA.
1. Understanding the Dynamics of a Shifting Telecommunications Industry
Forums, recommendation sites, and social media have provided consumers with an unprecedented level of market transparency, offering customers a variety of options to compare products and services. Furthermore, renowned companies like Amazon and Netflix have set exceedingly high standards for customers, demonstrating what's achievable through a profoundly customer-oriented approach. However, the German telecommunications industry has also produced several pioneering initiatives in the field of customer centricity.
Two selected examples are the telco NetCologne, which has established a customer advisory board to facilitate direct and personal dialogue between customers and the company, and the telco sub-brand fraenk, which simplifies the process of obtaining a mobile phone contract through an easy-to-use app.
Gone are the days of catering solely to the mass market with simplistic product and service offerings. Thus, the focus is shifting towards a more customer-oriented approach. It's an evolution necessitated by the imperative to optimize every touchpoint with the customer, transforming each interaction into a memorable experience. As telcos navigate this landscape of shifting paradigms, embracing customer centricity emerges as an inflection point for sustained relevance and competitive advantage.
2. Embracing Customer Centricity: The Imperative Pivot
With customers' increased focus on the holistic brand experience over product specifics, telcos must pivot their strategy on how to interact with the modern customer. This necessitates a decisive shift towards customer centricity which is not just a buzzword – it’s a strategic approach that places the customer at the heart of all business activities. It revolves around understanding and anticipating customer needs, preferences, and desires with precision. More specifically, customer centricity enables telcos to integrate customer needs seamlessly into every aspect of their organizational structure. Aligning sales, marketing, and service activities with customer needs directly drives customer acquisition, retention, and win-back.
The concept of customer centricity is essentially based on the following three elements, bridging customer and corporate worlds: Customer Journey, Customer Experience, and Customer Value.
Figure 1: Customer Centricity Framework - The foundation for positioning the customer at the centre of all business activities.
Is customer centricity really that simple? Well, customer centricity is more than just the sum of its three elements. Telcos must understand that the ability to connect the three elements significantly increases their collective value. It requires a holistic approach that cannot simply be replicated, as there is no one-size-fits-all solution. Each company must tailor its approach to its unique strategy, customer base, organizational setup, processes, and culture. Moreover, it is essential to understand that the shift towards a customer-centric organization is not a one-time exercise. The market evolves rapidly, necessitating telcos to establish a structure that enables them to constantly adapt to changing customer needs. Thus, customer centricity must be embedded into the company's DNA.
3. Decoding Customer Centricity: Leveraging the Five goetzpartners Customer Centricity Index (CCI) Dimensions
How can telcos integrate customer centricity into their DNA? While customer centricity has long been recognized in the telecommunications industry, its abstract nature demands a breakdown into measurable dimensions. The goetzpartners CCI combined with a comprehensive market study in Germany, specifically addresses this problem. The study design involved a three-step approach to empirically validate the CC framework, derive CCI scores for all providers by determining customer weightings for CC dimensions and finally, generate customer ratings of telco provider-specific CC performances. The index consists of five dimensions serving as a starting point for identifying deficits and levers for improvement. By evaluating customer centricity across these dimensions, telcos not only gain transparency on their own performance but also benchmark themselves against competitors and can therefore derive specific improvement areas.
The underlying market study for the index is specifically tailored to the telecommunications industry. However, the concept of the index and the insights it provides are easily transferable to other industries.
The goetzpartners CCI is defined through five dimensions, which grasp the complexity of customer centricity and make it measurable:
- Product Quality: Highlighting the quality and customization of offerings, product quality evaluates the breadth of choices available to customers, the performance of products or services, and customer perceptions of pricing in relation to value received.
- Customer Effort: Concentrating on the simplicity of the entire customer journey, from initial engagement to product usage and termination, customer effort measures how smooth and stress-free interactions with the telco are for customers in every phase of the journey.
- Omnichannel Experience: Focusing on the seamlessness of access to services across various channels, both online and offline, the omnichannel experience assesses the consistency and convenience of customer interactions throughout their journey.
- Service Quality: Evaluating the quality attributes of service channels, service quality encompasses factors such as the proficiency and knowledgeability of customer service representatives, the warmth and helpfulness of staff, and the degree of personalization in addressing customer needs.
- Customer Involvement: Focusing on the active involvement of customers and the integration of their feedback into company and product development processes, customer involvement assesses how effectively telcos engage with customers, request their input, and incorporate their suggestions to enhance products and services.
Figure 2: The goetzpartners Customer Centricity Index (CCI) – a concept for quantifying the customer centricity performance of telcos
Despite telcos' efforts to establish specialized customer centricity departments and implement numerous stand-alone customer-oriented initiatives, the best-performing competitor in the figure above shows that the telecommunications industry still has a lot of room for improvement. Only surpassing competitors should not be the sole objective; rather, the aim should be to establish pioneering benchmarks and elevate to the standards set by customer centricity champions such as Amazon and Netflix. Therefore, leveraging concepts such as the goetzpartners CCI, which facilitates the measurement and steering of customer-centric initiatives across five dimensions and 18 sub-dimensions, presents an opportunity to outperform industry norms and emerge as a first mover.
4. Synthesizing the Journey: Telco's Evolution Towards Customer Centricity
To pave the way for full customer centricity within telcos, developing a clearly defined roadmap is crucial. Acknowledging the diverse paths toward this goal, telcos must navigate their unique journey, recognizing that there's no one-size-fits-all approach. The roadmap presented below serves as a starting point, urging each telco to tailor and develop their own pathway toward customer centricity:
- Defining the north star: Customer centricity is more complex than it is currently practiced by telcos, which is why a vision needs to be defined. It is crucial not to think in silos, but to ensure that the vision extends across all areas of the organization.
- Understanding the current situation: For telcos, a data-driven analysis of the current customer centricity situation across different dimensions is vital. It enables telcos to understand their own performance and compare it to a specific benchmark.
- Identifying customer-centric performance boosters: Telcos must identify performance boosters along the various customer centricity dimensions, understand historic root causes for an absence of customer orientation and create resolution options.
- Embedding it in the DNA: Telcos must formulate a customer-centric plan that not only addresses the identified resolution options but builds an organization that is fully customer-centric and can easily adapt to changes.
Summary
In today's competitive telecommunications industry, customer satisfaction goes beyond product functionality—it's about the entire customer-brand interaction and experience. Telcos must prioritize embracing customer centricity to stay relevant and differentiate themselves. Leveraging concepts such as the goetzpartners CCI is crucial for telcos to gain insights into their own performance, benchmark against competitors and derive best practices.
However, achieving true customer centricity demands a holistic perspective on the organization and selected key adjustments in strategy, processes, and culture – there's no one-size-fits-all solution; each telco must carve its own path. Therefore, establishing a flexible structure that adapts to evolving customer needs is key-customer centricity must be embedded in the organization's DNA.
Authors:
Dr. Nima Ahmadi, Partner (Email)
Alexander Rast, Principal (Email)